TOKYO, June 11 Japanese lawmakers voted
overwhelmingly on Wednesday to open up the residential
electricity market to full competition, the latest step in a
radical shakeup of the power industry in the wake of the
Fukushima nuclear disaster.

The change frees up a 7.5 trillion yen ($73 billion) market
to all companies from around 2016, allowing them to sell
electricity and other services to almost 77 million households
and 7.4 million small business, according to government figures.

The move will expose Japan's 10 regional power monopolies to
new competition after the government seized on public anger over
shortcomings brought to light by the 2011 tsunami and meltdowns
at the Fukushima Daiichi station to reform the industry.

Winners include new operators who have been entering the
market with leaner operations, lower overheads and new
technologies. Investment in solar energy has surged after the
introduction of new tariffs to encourage the industry.

"The amendment ... gives people the freedom to choose their
electricity suppliers based on their own preference," said
Hisayo Takada of Greenpeace Japan said in a statement.

The reform bill was passed in the Upper House by 211 votes
to 26, a parliamentary official said. The Lower House approved
the legislation last month.

The three-stage reform program is a central plank of Prime
Minister Shinzo Abe's drive to overhaul the economy, as high
energy costs weigh on businesses and consumers.

INDEPENDENT SUPPLIERS

The changes have already led to new suppliers emerging and
have sparked a surge in companies aiming to become registered
power producers and suppliers (PPS) in anticipation of the
latest legislation.

Well known Japanese corporates including Mitsui & Co
and Nippon Paper Industries Co have registered to be
PPS, but the swelling ranks of those signing up includes
companies such as marina operator Wako Hiroshima Boatpark Co.

By Monday, there were 244 registered PPS, compared with
about 100 in September last year, the latest figures show.

The independents not only undercut the monopolies by
accepting lower profit margins, they also provide power
management systems and flexible buying plans to reduce prices
and save energy.

Many also trade electricity and use plant and infrastructure
paid for by other firms, so they don't have to recoup those
costs.

Greenpeace's Takada said the government should increase the
uptake of renewable energy as an alternative to nuclear energy.
All of Japan's 48 commercial reactors are shut down for safety
checks with no timetable for restarts set.

Operating solar installations have more than doubled to
about 13,500 megawatts by February since the new tarriffs were
introduced, according to the latest government figures.

FACING LOSSES

Tokyo Electric Power Co, the operator of the
wrecked Fukushima plant, Kansai Electric Power Co and
other regional monopolies are turning to each others regions
after suffering huge losses since the shutdown of reactors
forced them to increase imports of fossil fuels.

The monopolies, who until now have controlled all aspects of
generation and transmission, are already losing customers after
raising prices and analysts say that may increase when more
choices are availailable.

"If there is a steady stream out it will cause a lot of
problems," said Gerhard Fasol, the founder of Eurotechnology
Japan, a Tokyo-based consultancy on energy and technology
issues. "Even if they lose 5 percent it will be a huge
disruption."

Independent companies still need access to the utilities'
power grids before they can win significant market share. A bill
passed in November allows for a national grid operating company
to be set up in 2015 to allow all suppliers equal access.

The final phase of the reforms require regional monopolies
to spin off their transmission and distribution operations into
separate entities by 2020. Legislation for this is due to be
introduced next year.
(Additional reporting by Osamu Tsukimori; Editing by Miral
Fahmy and Richard Pullin)

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